The European Central Bank (ECB) has formally started its corporate sector purchase program (CSPP), a move announced by President Mario Draghi in March. The program, along with other measures such as ultra-cheap long-term loans and government bond-buying, aims to kickstart the euro zone economy and lift inflation to the bank's target of 2 percent.
As part of its plan, the ECB will buy euro-denominated investment grade bonds issued by companies in the euro area. The bank has already started buying five-year utility bonds in the secondary market, according to Reuters.
Some of the companies that are most eligible for bonds since they are non-financial and have the highest investment grade include EDF energy, AbInBev, Telefonica, Volkswagen, T-Mobile and Enel. Sectors that are most likely to benefit from this program include utilities, consumer goods and telecoms, according to analysts.
"The way we think about CSPPs is it is a step sideways not a step forward. It is a policy damage limitation because last year the credit market wasn't healthy under this absurdly low interest rate environment," Barnaby Martin, Managing Director of European Credit Strategy at BofA Merrill Lynch told CNBC. He added that the success of this policy will be seen in various stages and there is a huge reputational risk since the details of the bonds will be published regularly.